More than 80% of the stakeholders in the private company that owns the Empire State Building have approved IPO plans, according to an SEC filing today. The building in midtown Manhattan will be combined with 19 other properties to create the Empire State Realty Trust, which would be valued around $5 billion. This real estate investment trust (REIT) plans to go public to raise $1 billion in one of the largest US real estate IPOs ever.
The IPO will end a long fight over the fate of the building. It has changed hands many times in its 72-year history. In the 1950s, it was sold for $51.5 million and again in the 1960s for $65 million, the last time to a syndicate of investors. The controlling owners from that sale, the Malkin family of New York, argued for some years with minority stakeholders—who, along with their assorted descendants and beneficiaries, by now number some 2,800—over whether to take the building public. The Malkins wanted an IPO to help raise capital, among other reasons, while opponents criticized the more than $700 million in profit the family could gain from it. There is still some opposition but enough stakeholders now approve of the IPO that it will likely move forward.
Globally, REITs have been popular among investors as a recovery takes hold in certain markets. In the US, prices for office buildings are also on the rise as the economy improves. In January, Japan’s Sony Corp sold its building in New York for more than $1 billion, which was the highest price paid for an office building since Google acquired property in New York in 2010 for $1.8 billion.
REITs, which get revenue from mortgage or rent payments, usually offer higher dividends than investments in most companies. That’s especially attractive in the current low interest-rate environment in the US. And with the name of the Empire State Building, the IPO is sure to attract a lot of buzz.